Pintaras Jaya Bhd
As consumption spending slows and commodity prices plunge, there are few bright spots going forward. One exception is the construction sector, which will benefit from increased government spending.
In the recent Budget, the government allocated some RM76 billion for infrastructure projects which will start next year. These include the constructions of the 1,663km Pan-Borneo highway and the 56km Klang Valley MRT-Line 2, costing RM23 billion and RM27 billion respectively.
While the construction sector will benefit, picking the right stocks is difficult. Given its solid track record in pilling and foundation works, we believe Pintaras Jaya may be one of the key beneficiaries.
Pintaras has undertaken works for the first phase of the MRT project and stands a good chance of securing jobs for the second phase. For the first phase, it has undertaken bored pilling works from the One Utama to The Curve stations, and from the Dataran Sunway to Section 17 stations. Earlier in March 2014, it won the RM74 million jobs on the iconic 118-storey Warisan Merdeka.
Despite the cyclical nature of the construction sector in the past – and thin margins due to fluctuating building material costs, Pintaras has consistently delivered solid earnings and margins, and is cash rich.
Over the past five years, revenue increased from RM105.7 million in FY June 2010 to RM201.9 million in FY2014, while net profit rose from RM20.7 million to RM54.2 million. During that period, operating margin and net margins averaged 33.34% and 25.35% respectively. Pintaras had net cash of RM151.7 million as at 30 June 2014, or RM0.95 per share. Dividends totaled 6 sen in FY2014, with a yield of 1.4%. The stock is trading at 2.3 times book with a trailing 12-month P/E of 12.9 times.
This article first appeared in The Edge Financial Daily, on October 27, 2014.